Tuesday, September 5, 2017

Pharmaceutical Manufacturer Novo Nordisk Inc. will pay $58.65 million to resolve allegations that the company failed to comply with the FDA-mandated Risk Evaluation and Mitigation Strategy (REMS) for its Type II diabetes medication Victoza, the Justice Department announced today. The resolution includes disgorgement of $12.15 million for alleged violations of the Federal Food, Drug, and Cosmetic Act (FDCA) from 2010 to 2012 and a payment of $46.5 million for alleged violations of the False Claims Act (FCA) from 2010 to 2014. Novo Nordisk is a subsidiary of Novo Nordisk U.S. Holdings Inc., which is a subsidiary of Novo Nordisk A/S of Denmark. Novo Nordisk’s U.S. headquarters is in Plainsboro, New Jersey.

“Today’s resolution demonstrates the Department of Justice’s continued commitment to ensuring that drug manufacturers comply with the law,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “When a drug manufacturer fails to share accurate risk information with doctors and patients, it deprives physicians of information vital to medical decision-making.”

In a civil complaint filed today in the U.S. District Court for the District of Columbia asserting claims under the FDCA, the government alleged that, at the time of Victoza’s approval in 2010, the Food and Drug Administration (FDA) required a REMS to mitigate the potential risk in humans of a rare form of cancer called Medullary Thyroid Carcinoma (MTC) associated with the drug. The REMS required Novo Nordisk to provide information regarding Victoza’s potential risk of MTC to physicians. A manufacturer that fails to comply with the requirements of the REMS, including requirements to communicate accurate risk information, renders the drug misbranded under the law.

As alleged in the complaint, some Novo Nordisk sales representatives gave information to physicians that created the false or misleading impression that the Victoza REMS-required message was erroneous, irrelevant, or unimportant. The complaint further alleges that Novo Nordisk failed to comply with the REMS by creating the false or misleading impression about the Victoza REMS-required risk message that violated provisions of the FDCA and led some physicians to be unaware of the potential risks when prescribing Victoza.

As alleged in the government’s complaint, after a survey in 2011 showed that half of primary care doctors polled were unaware of the potential risk of MTC associated with the drug, the FDA required a modification to the REMS to increase awareness of the potential risk. Rather than appropriately implementing the modification, the complaint alleges that Novo Nordisk instructed its sales force to provide statements to doctors that obscured the risk information and failed to comply with the REMS modification. Novo Nordisk has agreed to disgorge $12.15 million in profits derived from its unlawful conduct in violation of the FDCA.

“Novo Nordisk’s actions unnecessarily put vulnerable patients at risk,” said U.S. Attorney Channing D. Phillips for the District of Columbia. “We are committed to holding companies accountable for violating the integrity of the FDA’s efforts to ensure that doctors and patients have accurate information that allows them to make appropriate decisions about which drugs to use in their care. Working with the FDA and other law enforcement partners, we have sent a strong signal to the drug industry today.”

“Novo Nordisk Inc. sales representatives misled physicians by failing to accurately disclose a potential life threatening side effect of a prescription drug, and needlessly increased risks to patients being treated with this drug,” said Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office. “The FBI is committed to ensuring that the private industry provides honest and accurate risk information to the public and will continue to work closely with our law enforcement partners to investigate companies who do not comply with FDA-mandated policies.”

“We need to trust that pharmaceutical companies truthfully represent their products’ potential risks,” said Special Agent in Charge Nick DiGiulio for the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG). “We will continue to work with our partners to ensure federal health care dollars are spent only on drugs that are marketed honestly.”

Novo Nordisk will pay an additional $46.5 million to the federal government and the states to resolve claims under the FCA and state false claims acts. This portion of the settlement resolves allegations that Novo Nordisk caused the submission of false claims from 2010 to 2014 to federal health care programs for Victoza by arming its sales force with messages that could create a false or misleading impression with physicians that the Victoza REMS-required message about the potential risk of MTC associated with Victoza was erroneous, irrelevant, or unimportant and by encouraging the sale to and use of Victoza by adult patients who did not have Type II diabetes. The Food and Drug Administration (FDA) has not approved Victoza as safe and effective for use by adult patients who do not have Type II diabetes.

As a result of today’s FCA settlement, the federal government will receive $43,129,026 and state Medicaid programs will receive $3,320,963. The Medicaid program is funded jointly by the state and federal governments.

The settlements were the result of a coordinated effort among the U.S. Attorney’s Office for the District of Columbia and the Civil Division’s Consumer Protection Branch and Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel. The investigation was conducted by the FDA’s Office of Criminal Investigations, the FBI, HHS-OIG, the Defense Criminal Investigative Service and the Office of Personnel Management, Office of the Inspector General.

Tuesday, August 22, 2017

WASHINGTON – The United States filed two complaints today seeking imposition of a civil money laundering penalty and to civilly forfeit more than $11 million from companies that allegedly acted as financial facilitators for North Korea, announced U.S. Attorney Channing D. Phillips, Michael DeLeon, Special Agent in Charge of the FBI’s Phoenix Field Office, and Michael J. Anderson, Special Agent in Charge of the FBI’s Chicago Field Office.

The actions, filed in the U.S. District Court for the District of Columbia, represent two of the largest seizures of North Korean funds by the Department of Justice. One complaint seeks $6,999,925 associated with Velmur Management Pte Ltd., a Singapore-based company. The other seeks $4,083,935 from Dandong Chengtai Trading Co. Ltd., also known as Dandong Zhicheng Metallic Material Co., Ltd., a company in Dandong, China.

The lawsuits follow a similar complaint, filed in June 2017, seeking more than $1.9 million from Mingzheng International Trading Limited, a company based in Shenyang, China.

The complaints allege that the companies have participated in schemes to launder U.S. dollars on behalf of sanctioned North Korean entities. According to the complaints, the companies participated in financial transactions in violation of the International Emergency Economic Powers Act (IEEPA), the North Korean Sanctions and Policy Enhancement Act of 2016, and federal conspiracy and money laundering statutes. Today’s complaints are the first filed actions based on the 2016 North Korean Sanctions and Policy Enhancement Act.

“These complaints show our determination to stop North Korean sanctioned banks and their foreign financial facilitators from aiding North Korea in illegally accessing the United States financial system to obtain goods and services in the global market place,” said U.S. Attorney Phillips. “According to the complaints, these front companies are supporting sanctioned North Korean entities, including North Korean military and North Korean weapons programs. Working with our law enforcement partners, we will vigorously enforce vital sanctions laws.”

“The complaints allege that these companies are assisting North Korea in evading sanctions, which is in direct conflict with our national security interests,” said Special Agent in Charge DeLeon, of the FBI’s Phoenix Field Division. “We will continue to use the necessary resources to expose these types of actions and investigate those who utilize the U.S. banking systems for illegal activities.”

This complaint alleges that Velmur and Transatlantic Partners Pte. Ltd. (Transatlantic) laundered United States dollars on behalf of sanctioned North Korean banks that were seeking to procure petroleum products from JSC Independent Petroleum Company (IPC), a designated entity. The complaint also seeks a civil monetary penalty against Velmur and Transatlantic for prior sanctions and money laundering violations related to this scheme.

According to the complaint, designated North Korean banks use front companies, including Transatlantic, to make U.S. dollar payments to Velmur. The complaint relates to funds that were transferred through four different companies and remitted to Velmur to wire funds to JSC Independent Petroleum Company (IPC), a Russian petroleum products supplier. On June 1, 2017, the Department of the Treasury’s Office of Foreign Asset Controls (OFAC) designated IPC. The designation noted that IPC had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of petroleum products to North Korea.

The United Nations Panel of Experts reported in 2017 on the methods used by North Korean banks to evade sanctions and continue to access the international banking system. Specifically, despite strengthened financial sanctions, North Korean networks are adapting by using greater ingenuity in accessing formal banking channels. This includes maintaining correspondent bank accounts and representative offices abroad which are staffed by foreign nationals making use of front companies. These broad interwoven networks allow the North Korean banks to conduct illicit procurement and banking activity.

An FBI investigation revealed that Velmur’s and Transatlantic’s activities mirror this money laundering paradigm. Specifically, companies identified in the complaint and Transatlantic act as front companies for designated North Korean banks.

The government is seeking to forfeit $6,999,925 that was wired to Velmur in May 2017. The U.S. dollar payments, which cleared through the U.S., are alleged to violate U.S. law, because the entities were surreptitiously making them on behalf of the designated North Korean Banks, whose designation precluded such U.S. dollar transactions. The government also is seeking imposition of a monetary penalty commensurate with the millions of dollars allegedly laundered by Velmur and Transatlantic.

This complaint alleges that Dandong Chengtai and associated front companies controlled by Chi Yupeng, a Chinese national, comprise one of the largest financial facilitators for North Korea. According to the complaint, Dandong Chengtai conspired to evade U.S. economic sanctions by facilitating prohibited U.S. dollar transactions through the United States on behalf of the North Korean Workers’ Party, a sanctioned entity.

The complaint further alleges that the North Korean government relies on exports of coal as its primary means of obtaining access to foreign currency, and that the North Korean military controls the amount of coal produced and its subsequent export. The North Korean government uses proceeds of coal sales to fund its weapons of mass destruction program and missile programs. Coal generates more than $1 billion in revenue per year for North Korea. The investigation revealed that Dandong Chengtai is one of the largest importers of North Korean coal in China, and has continued to engage in illicit U.S. dollar transactions related to its coal sales to benefit North Korea.

The complaint alleges that Dandong Chengtai facilitated wire transfers denominated in U.S. dollars for purchases of goods that are well outside the scope of a mineral trading company. Financial records reveal that purchases of bulk commodities such as sugar, rubber, petroleum products, and soybean oil, among others, were in fact destined for North Korea.

As reported in findings by the Treasury Department and the United Nations Panel of Experts, North Korean financial facilitators frequently establish and maintain offshore U.S. dollar accounts for the purposes of remitting wire transfers denominated in U.S. dollars on behalf of sanctioned North Korean entities. These broad interwoven networks allow sanctioned North Korean entities to conduct illicit procurement and banking activity.

The government is seeking to forfeit $4,083,935 that Dandong Chengtai wired on June 21, 2017 to Maison Trading, using their Chinese bank accounts. The investigation revealed that Maison Trading is a front company operated by a Dandong Chengtai employee. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because the recent North Korean sanctions law specifically barred U.S. dollar transactions involving North Korean coal and the proceeds of these transactions were for the benefit of the North Korea Worker’s Party, whose designation precluded such U.S. dollar transactions.

This case relates to a previously unsealed opinion from Chief Judge Beryl A. Howell of the U.S. District Court for the District of Columbia, which found that probable cause existed to seize funds belonging to Dandong Chengtai.

**

The claims made in the complaints are only allegations and do not constitute a determination of liability.

The FBI’s Phoenix Field Office is investigating the case involving Velmur Management Pte Ltd. and Transatlantic Partners Pte., Ltd. The FBI’s Chicago Field Office is investigating the case involving Dandong Chengtai Trading Co. Ltd. Both investigations are being supported by the FBI Counterproliferation Center.

Tuesday, August 1, 2017

South African Doctor Took Over $200,000 Meant to Promote Safer Childbirth

WASHINGTON – Eugene Sickle, the former deputy executive director of a South African research institute, was sentenced today to seven months of incarceration and ordered to pay $206,250 in restitution for a scheme in which he stole grant funds originating with the U.S. Agency for International Development (USAID).

The sentencing, in the U.S. District Court for the District of Columbia, was announced by Channing D. Phillips, U.S. Attorney for the District of Columbia, and Jonathan Schofield, Special Agent in Charge for the USAID Office of Inspector General, Office of Investigations.

Sickle, 47, a chemist and a citizen of South Africa, pled guilty in May 2017 to a charge of theft concerning programs receiving federal funds. The plea, which was contingent upon the Court’s approval, called for an agreed-upon sentence of six months to 12 months and a day of incarceration. The Honorable Ketanji Brown Jackson accepted the plea today and sentenced Sickle accordingly. In addition to the restitution order, the judge issued a forfeiture money judgment of $206,250. Following his release, Sickle will be subject to deportation proceedings.

Based in Washington, D.C., USAID is a U.S. government agency that provides international development assistance and humanitarian aid worldwide. It implements and administers foreign assistance programs and funds, including those supporting global health, from dedicated offices (“missions”) around the world. USAID’s South Africa mission is one such office that works with local organizations in that country. USAID’s Office of Inspector General bases investigators in 11 countries outside the United States, including South Africa, and provides oversight of USAID programs and operations around the world.

According to a statement of offense, signed by the defendant as well as the government, Sickle was deputy executive director of the Wits Reproductive Health and HIV Institute, a South African research institute focusing on sexual and reproductive health as well as vaccine-preventable diseases. Its primary source of funding is USAID, and Sickle administered grant funds for projects. One such project involved a mobile electronic device software application, in connection with the South African National Department of Health, which would help facilitate safer childbirth deliveries in South Africa.

On Oct. 2, 2015, according to the statement of offense, Sickle and the institute’s chief executive officer signed a contract with a company called Alzar Consulting Services Ltd. to develop the childbirth app. Likewise, an individual named “Dr. Carla Das Neves” Alzar’s purported director, signed the contract. Pursuant to this contract, the institute made two payments to Alzar totaling $206,250. However, the childbirth app has never been developed.

Subsequent investigation revealed that Sickle created Alzar in the British Virgin Islands. Unbeknownst to anyone at the research institute, he was the sole owner of the company. Sickle also created e-mail accounts for Alzar and fake Alzar employees, including “Carla Das Neves.” He created a fake LinkedIn page for “Carla Das Neves,” which had a beach scene for a picture, and falsely claimed that “Carla Das Neves” was a trained expert in aid/relief work.

Sickle shepherded the research institute’s contract with Alzar through the approval and compliance process. He signed the contract both as himself and also as “Carla Das Neves.”

According to the statement of offense, Sickle did not perform any of the work required under the contract, nor did anyone else. None of the USAID money was used for its intended purpose to facilitate safer childbirth in South Africa. Instead, Sickle diverted the money to himself personally, and an associate.

Sickle resigned from his position last year. Agents with the USAID Inspector General’s Office arrested him in Washington, D.C., in February 2017. He has been in custody ever since.

This case was investigated by the U.S. Agency for International Development Office of Inspector General. It was prosecuted by Assistant U.S. Attorneys John P. Marston and Denise Simmonds and Special Assistant U.S. Attorney Vesna Harasic-Yaksic of the U.S. Attorney’s Office for the District of Columbia.

Thursday, July 27, 2017

Wide-Ranging Operation Filed Over 12,000 Fraudulent Tax Returns Seeking More Than $42 Million

WASHINGTON – A District of Columbia woman was sentenced today to 63 months in prison for her involvement in a scheme to fraudulently obtain millions of dollars in income tax refunds, announced U.S. Attorney Channing D. Phillips; Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; Special Agent in Charge Kimberly Lappin of the Internal Revenue Service Criminal Investigation (IRS-CI) Washington D.C. Field Office; Inspector in Charge Robert B. Wemyss of the U.S. Postal Inspection Service, Washington Division, and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Tarkara Cooper, 34, was convicted by a jury on Feb. 17, 2017, for conspiring to commit theft of government funds and defraud the United States and theft of public money. Two of her co-defendants, Tony Bryant, 55, and his son, Brian Bryant, 29, both of Clinton, Md., were also convicted at trial and are awaiting sentencing.

Cooper was part of a massive sophisticated stolen identity refund fraud scheme that involved a network of more than 130 people, many of whom were receiving public assistance. Conspirators fraudulently claimed refunds for tax years 2005 through 2012, often in the names of people whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners. Returns were also filed in the names of, and refunds were issued to, willing participants in the scheme. The returns filed listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia. According to court documents, the overall case involved the filing of at least 12,000 fraudulent federal income tax returns that sought at least $42 million in refunds.

Conspirators played various roles in the scheme: stealing identifying information; allowing their personal identifying information to be used; creating and mailing fraudulent federal tax returns; allowing their addresses to be used for receipt of the refund checks; cashing the refund checks; providing bank accounts into which the refund checks were deposited and forging endorsements of identity theft victims on the refund checks. The false returns typically reported inflated or fictitious income from a sole proprietorship and claimed phony dependents to generate an Earned Income Tax Credit, a refundable federal income tax credit for working families with low to moderate incomes. To date, approximately two dozen participants in this scheme have pleaded guilty.

According to the evidence presented at trial, from approximately April 2010 through June 2012, Cooper and the Bryants participated in claiming $4,959,310 in fraudulent refunds, of which the IRS paid out approximately $2,285,717. Cooper agreed to allow her residence to be used for the delivery of tax refund checks, and was paid by a co-conspirator when she provided the tax refund checks to him. The Bryants deposited refund checks fraudulently obtained by others into accounts that they controlled.

In addition to the term of prison imposed, U.S. District Judge Rosemary M. Collyer ordered Cooper to serve three years of supervised release and to pay $1,926,958 in restitution to the IRS. She also ordered a forfeiture money judgment of $16,750.

U.S. Attorney Phillips, Acting Deputy Assistant Attorney General Goldberg, Special Agent in Charge Lappin, Inspector in Charge Wemyss, and Assistant Inspector General Phillips commended the special agents who conducted the investigation and acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein; Assistant U.S. Attorney Chrisellen Kolb; Paralegal Specialists Jessica Mundi, Aisha Keys, and Donna Galindo; former Paralegal Specialist Julie Dailey; Litigation Technology Specialist Ron Royal; Investigative Analysts William Hamann and Zachary McMenamin, and Victim/Witness Advocate Tonya Jones. They also expressed appreciation for the work of Trial Attorneys Jeffrey B. Bender, Thomas F. Koelbl, and Jessica Moran of the Tax Division, who worked on the case.

Finally, they commended the work of Assistant U.S. Attorneys Ellen Chubin Epstein and Michelle Bradford of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorney Kimberly G. Ang of the Tax Division, who prosecuted the case, as well as Assistant U.S. Attorney Diane Lucas, who assisted with forfeiture issues.

Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.

Monday, July 17, 2017

WASHINGTON – David Tyrone Johnson, 48, of Washington, D.C., was sentenced today to a year and a day in prison on federal charges arising from a real estate scheme involving forged mortgage satisfaction documents, announced U.S. Attorney Channing D. Phillips and Andrew Vale, Assistant Director in Charge of the FBI’s Washington Field Office.

Johnson pled guilty in April 2017, in the U.S. District Court for the District of Columbia, to charges of bank fraud and making false statements. He was sentenced by the Honorable Ketanji Brown Jackson. Following his prison term, Johnson will be placed on two years of supervised release. He also must pay $337,105 in restitution to Fidelity National Title Insurance Company, as well as a forfeiture money judgment of $170,688.

According to a statement of offense submitted at the time of the guilty plea, SunTrust Mortgage, Inc. loaned a friend of Johnson’s approximately $470,000 in 2008 to purchase residential real estate in the 100 block of 57th Street SE. By 2009, the friend had failed to repay the mortgage loans, and in 2010, SunTrust Mortgage filed a notice of foreclosure with the District of Columbia’s Recorder of Deeds. In April 2013, SunTrust Mortgage began the process of foreclosing on the mortgage and taking possession of the property, due to the friend’s failure to make good and timely payments on the mortgage loans.

Sometime before Oct. 2, 2013, Johnson caused the creation of two phony and forged certificates of satisfaction, which falsely represented that the SunTrust Mortgage loans at the property on 57th Street SE had been paid and that his friend owned the property “free and clear.” According to the statement of offense, on Oct. 2, 2013, Johnson filed these two phony certificates of satisfaction with the Recorder of Deeds.

In or about December 2013, after the fake certificates of satisfaction allowed the friend to sell the property without paying the outstanding mortgages, the title and escrow company wired out the sales proceeds of $337,105, of which approximately $170,688 was obtained by Johnson.

In addition, in 2015, Johnson was required to submit a financial disclosure form to his government agency employer; however, on that form, Johnson failed to disclose the money he obtained from the sales proceeds of the property, knowing that he had obtained the money. This failure to inform his government agency employer was material or important to his employer, and one that resulted in a false statement on his financial disclosure form.

In announcing the sentence, U.S. Attorney Phillips and Assistant Director in Charge Vale expressed appreciation for the work performed by those who investigated the case and assisted in preparing it for trial from the FBI, including the Washington Field Office and the FBI Laboratory. They also acknowledged the efforts of those working on the case from the U.S. Attorney’s Office, including Paralegal Specialist Christopher Toms; former Paralegal Specialists Corinne Kleinman and Kaitlyn Krueger; Litigation Tech Specialist Ron Royal, and Assistant U.S. Attorney Thomas Swanton, who assisted with forfeiture issues. Finally, they commended the work of Assistant U.S. Attorney Virginia Cheatham, who prosecuted the case.

Thursday, July 13, 2017

WASHINGTON – Two former staff employees of a member of the U.S. House of Representatives have been indicted following an investigation into the circulation of private, nude images and videos of the member and the member’s spouse, announced U.S. Attorney Channing D. Phillips and Matthew R. Verderosa, Chief of the United States Capitol Police.

Juan R. McCullum, 35, of Washington, D.C., was indicted by a grand jury on two counts of cyberstalking, and a co-worker, Dorene Browne-Louis, 45, of Upper Marlboro, Md., was indicted on two counts of obstruction of justice. The indictment, which was unsealed today, was returned on July 11, 2017, in the U.S. District Court for the District of Columbia.

According to the indictment, McCullum worked from April 2015 until June 2016 in the House member’s legislative office in Washington, D.C. Browne-Louis worked in the same office from January 2015 until April 2016.

The indictment alleges that, during the course of his employment, McCullum offered in March 2016 to assist the House member in repairing the member’s malfunctioning, password-protected cellular iPhone by taking the device to a local Apple store. According to the indictment, the House member provided McCullum with the device solely to have the iPhone repaired. McCullum was not given permission to take, copy, or distribute any of the contents of the iPhone. The iPhone contained the private, nude images and videos.

As alleged in the indictment, in July 2016, after McCullum left the House member’s staff, he engaged in a course of conduct that included creating a Hotmail account and a Facebook social media account, using a fictitious name, to distribute and post the private images and videos. Further, according to the indictment, he encouraged others on social media to redistribute the images and videos in the member’s congressional district. The indictment alleges that McCullum also sent text messages to Browne-Louis alerting her to his activities as early as July 2, 2016, as well as e-mail messages containing several of the images and videos.

On July 6, 2016, federal law enforcement initiated a criminal investigation into the unauthorized distribution and publication of the images and videos. The charges against Browne-Louis involve text messages from McCullum that she allegedly deleted from her cellular phone, as well as false, incomplete, and misleading statements that she allegedly made to law enforcement and a federal grand jury regarding her knowledge of the activities.

Browne-Louis made her first appearance today in the U.S. District Court for the District of Columbia. She pled not guilty to the charges and was released on personal recognizance pending a status hearing scheduled for July 19, 2017. McCullum’s first court appearance has not yet been scheduled.

The charge of cyberstalking carries a statutory maximum of five years in prison and potential financial penalties. The charge of obstruction of justice carries a statutory maximum of 20 years of incarceration and potential financial penalties.

An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until, and unless, proven guilty.

This case is being investigated by the United States Capitol Police. It is being prosecuted by Assistant U.S. Attorneys Veronica Jennings and Tejpal S. Chawla of the U.S. Attorney’s Office for the District of Columbia. Assistance was provided by former Assistant U.S. Attorney Natalia Medina, Criminal Investigator John Marsh, Paralegal Specialists Bianca Evans and Matthew Ruggiero, and Litigation Technology Specialists Leif Hickling, Thomas Royal and Paul Howell, all of the U.S. Attorney’s Office.

Company Allegedly Violated Sanctions by Laundering U.S. Dollar Transactions on Behalf of North Korea’s Foreign Trade Bank

WASHINGTON – The United States has filed a complaint to civilly forfeit $1,902,976 from Mingzheng International Trading Limited (Mingzheng), a company based in Shenyang, China. The complaint alleges that Mingzheng is a front company that was created to launder United States dollars on behalf of sanctioned North Korean entities.

According to the complaint, Mingzheng conspired to evade U.S. economic sanctions by facilitating prohibited U.S. dollar transactions through the United States on behalf of the Foreign Trade Bank, a sanctioned entity in the Democratic People’s Republic of Korea (North Korea) and to launder the proceeds of that conduct through U.S. financial institutions.

The forfeiture action was announced today by U.S. Attorney Channing D. Phillips and Michael DeLeon, Special Agent in Charge of the FBI’s Phoenix Field Office.

The action represents one of the largest seizures of North Korean funds by the Department of Justice.

“This complaint alleges that parties in China established and used a front company to surreptitiously move North Korean money through the United States and violated the sanctions imposed by our government on North Korea,” said U.S. Attorney Phillips. “Sanctions laws are critical to our national security and foreign policy interests, and this case demonstrates that we will seek significant remedies for those companies that violate them.”

“The FBI has dedicated substantial resources to investigate complex illegal monetary transactions involving foreign adversaries. This specific case has significant national security implications,” said Special Agent in Charge DeLeon. “The men and women of the FBI’s Phoenix Field Division worked diligently to identify the illegal transactions. We hope this sends a strong message to those who utilize US banking systems for illegal activities.”

The complaint was filed on June 14, 2017, in the U.S. District Court for the District of Columbia. According to the complaint, Mingzheng is owned by a Chinese national and is based in Shenyang, China. Mingzheng allegedly operated as a front company for a foreign-based branch of the North Korea-based Foreign Trade Bank (FTB). In March 2013, the U.S. Treasury Department designated the Foreign Trade Bank as a sanctioned entity pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations. The designation noted that the Foreign Trade Bank is a state-owned bank, and “acts as North Korea’s primary foreign exchange bank.” The designation further noted that North Korea uses the Foreign Trade Bank to facilitate millions of dollars in transactions on behalf of actors linked to its proliferation network.

The United Nations Panel of Experts reported in 2017 as to how North Korean banks have been able to evade sanctions and continue to access the international banking system. Specifically, despite strengthened financial sanctions, North Korean networks are adapting by using greater ingenuity in accessing formal banking channels. This includes maintaining correspondent bank accounts and representative offices abroad, which are staffed by foreign nationals making use of front companies. These broad interwoven networks allow the North Korean banks to conduct illicit procurement and banking activity.

An FBI investigation revealed that Mingzheng’s alleged activities mirror this money laundering paradigm. Specifically, Mingzheng acts a front company for a covert Chinese branch of the Foreign Trade Bank. This branch is operated by a Chinese national who has historically been tied to the Foreign Trade Bank.

The government is seeking to forfeit $1,902,976 that was transacted in October and November of 2015 by Mingzheng, via wire transfers, using their Chinese bank accounts. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because Mingzheng was surreptitiously making them on behalf of the Foreign Trade Bank, whose designation precluded such U.S. dollar transactions.

The claims made in the complaint are only allegations and do not constitute a determination of liability.